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Understandably, taking an electronic document such as a spreadsheet, printing it, cutting it up, and telling one’s opponent to paste it back together again, when the electronic document can be produced with a keystroke is madness in the world in which we live.

The Covad opinion is a “direct sequel” to the “Christmas Eve” opinion of last year. The second opinion is from May 27, 2009, which has must read analysis on forensic imaging of hard drives and email servers. However, no one is calling the second opinion the “Sink the Bismark” Order, in recognition of the events of May 27, 1941.

In the new opinion (which history fans could call the Voyage 2 Opinion), the Plaintiff brought a motion to compel compliance with the “Christmas Eve” opinion due to the “adequacy” of the Defendants’ responses and email searches. Covad, 1-2.

The Case at Bar: Format and Completeness

There are two intertwined issues of Covad 3: Format and Completeness.

“Format” addressed the December 24, 2008 Order regarding:

(1) The 35,000 pages the Defendant produced in hard copy prior to the Motion to Compel; Covad, 2-3.

(2) The 2,832 pages of documents originally produced in hard copy while the Motion to Compel was pending; Covad, 3.

(3) Any other information that have been produced since the December 24, 2008 Order or will be produced in the future. Covad, 3.

“Completeness” addressed whether the Defendants had produced anything pursuant to the discovery requests. Covad, 3. Plaintiff Covad advanced the following arguments in support of their motion:

(1) Only a subset of all the documents that should have been produced in response to the original 44 Requests to Produce Documents have been produced; Covad, 3.

(2) The e-mail search, no matter what it produced, was not designed to find the relevant e-mails because of the narrow and under-inclusive search terms that were used; Covad, 3.

(3) The litigation hold and search term documents have never been produced in electronic format, Covad, 3.

(4) Defendant Revonet has not produced many of the documents identified in its own initial disclosures. Covad, 3.

Judge Facciola set the stage for possibly limiting any more productions of relevant electronically stored information under the Federal Rule of Civil Procedure Rule 26(b)(2)(C) “balancing factors” that “…include….(i) whether the discovery is “unreasonably cumulative or duplicative,” and (ii) whether the party seeking discovery “has had ample opportunity to obtain the information by discovery in the action.” Covad, 4.

The Court acknowledged that discovery was ongoing and procedurally the Defendants could not respond to some of the issues in the Plaintiff’s Reply brief. However, the Court wanted answers to these four issues:

1. Is it Revonet’s position that its production to date satisfies all the demands made of it by Covad’s Request for Production of Documents? Covad, 5.

2. Will Revonet produce what Covad calls the litigation hold and search term documents in native format? Covad, 5.

3. Does Revonet consider itself bound, by either the Requests for Production or by some agreement with counsel to produce the litigation hold and search term documents? If not, why not? Covad, 5.

4. Has Revonet produced or will it produce the items that Covad argues were identified in Revonet’s initial disclosures? Covad, 5-6.

The Court ordered a neutral statement of facts to answer the above issues. Moreover, the Court would deem these answers certified under Federal Rule of Civil Procedure Rule 26(g)(1). Covad, 5-6. The Court alluded in Covad 2 that it would potentially take violating Rule 26(g)(1)(A) to compel a forensic search of the Defendant’s email servers. Covad Communs. Co. v. Revonet, Inc., 2009 U.S. Dist. LEXIS 47841, 22 (D.D.C. May 27, 2009).

When Production Sets Don’t Match

The Plaintiff claimed the Defendant did not produce all of the emails in native file format, thus resulting in a discrepancy between the paper and native file productions. Covad, 7.

The Defendant explained that the review platform they used for the first paper production was only able to export email in an HTML format. Covad, 7. After the first Court order, the Defendants re-produced email messages with a PST using a different production method. Covad, 7.

As one can imagine, there was a difference between the first production in paper and the second in native file format. The Defendants claimed it was too burdensome to cross-reference the two productions to define the size and scope of the discrepancy. Covad, 7.

This is an avoidable situation. While I am not sure exactly what was done in this case, ESI should be collected in a documented methodology and processed in a defensible manner. This should give the party MD5 Hash Values and an index of the processed ESI. All litigation support review software creates a document index and almost all a production log. This should enable a party to track what has and has not been produced in discovery. Instead, the Defendant has to cross-reference a HTML system to a PST production. This situation could have been avoided with treating ESI as ESI and not producing paper in the first place.

As Judge Facciola stated:

More to the point, I have already resolved the issue of whether, on balance, Revonet should be required to produce the 35,000 pages in native format, and I have not seen any new information that causes me to revisit my conclusion on that point. Obviously, I contemplated that the e-mails be produced in native format; I was not granting a license to produce fewer e-mails in native format than were produced in hard copy. Hence, Revonet is going to have to produce the missing e-mails. Covad, 8-9.

A Bad Form of Production Plan

The Defendants also produced “useless” paper printouts of spreadsheets that “run horizontally across several sheets of paper, resulting in a sea of seemingly random numbers and data, with no effective labels, column headings, or other identifying information.” Covad, 10. The Plaintiff’s attorney was told he “could paste these hundreds of pages together,” to make the “paper-ized” spreadsheets useable. Covad, 10.

The Parties were attempting to resolve this form of production debacle outside of court at the time of the opinion. Judge Facciola reminded the Parties that “…documents that were originally created in an electronic format (which must be the vast majority, if not all, of them) must be produced in an electronic format that is ‘the form or forms in which it is ordinarily maintained or in a reasonably usable form or forms.’” Covad, 12, Fed. R. Civ. P. 34 (b)(2)(E)(ii).

It is an understatement to say Courts frown on parties producing ESI in a way that degrades its searchability. Covad, 12-13. As Judge Facciola stated:

Understandably, taking an electronic document such as a spreadsheet, printing it, cutting it up, and telling one’s opponent to paste it back together again, when the electronic document can be produced with a keystroke is madness in the world in which we live. Covad, 14.

The clock is ticking for the Defendants to respond to the Court’s questions. I am waiting for what happens next in Covad 4. Depending on the timing of the pleadings and the Defendants’ actions, Judge Facciola might be issuing an “Antietam” or “Trafalgar” order this fall.

Banks really should cooperate on electronic discovery issues when they sue each other.

Instead, Wells Fargo and LaSalle exchanged broadsides over searching back-up tapes and spoliation claims very late in the litigation. The Court denied the dueling motions and dressed down the parties for not conferring about ESI earlier in the case.

The Parties were bound by several scheduling orders, which included them conferring on the production of electronically stored information and a discovery cut-off date that was extended several times. Wells Fargo Bank, N.A., 3-4.

Essentially Wells Fargo contends that LaSalle did not search a number of backup tapes for relevant documents and should be subject to spoliation sanctions for not maintaining all of the backup tapes which might have contained responsive ESI. LaSalle responds that ESI on backup tapes is not readily accessible in that it would take six months and almost half a million dollars to restore the backup tapes. LaSalle counterpunchs by accusing Wells Fargo of the same sins — not producing documents from backup tapes, not placing a litigation hold on backups, etc. Wells Fargo Bank, N.A., 5.

The Court was less than thrilled with the Parties in this case not conferring on electronically stored information and starting an ESI grudge match four months after the close of discovery and two months before trial. Wells Fargo Bank, N.A., 7. As the Court bluntly stated:

The current dispute is a mild example of the sorts of problems which result when counsel do not deal systematically with ESI problems and possibilities at the outset of litigation, instead of filing one-paragraph boilerplate statements about ESI and waiting for the explosion later. Wells Fargo Bank, N.A., 6-7.

The Court found that restoring the back-up takes was “disproportionate to the likely utility of doing so.” Wells Fargo Bank, N.A., 7. Moreover, the cost of the restoration was out of proportion to the amount in controversy. Wells Fargo Bank, N.A., 8. Additionally, the Defendant’s practice of printing hard copies of “important” loan documents that had been produced in discovery made the chances of finding anything new remote. Wells Fargo Bank, N.A., 8.

Electronically stored information must be addressed early in the lawsuit in the Rule 26(f) Conference, not on the eve of trial.

The Court gave some practice pointers for having an effective meet and confer process by citing to the Sedona Conference Cooperation Proclamation. The Court included the following six points to aid counsel on ESI matters:

The stage is set: There is a triggering event for a lawsuit, a litigation hold is enacted and evidence is preserved.

A drama played out not according to the above script with a law firm and client almost ending up on the hook for a botched litigation hold.

In Pinstripe, Inc. v. Manpower, Inc., the Defendant failed to enact a litigation hold after being instructed by counsel to preserve evidence. However, after learning of the failed hold and loss of evidence, the Defendants spent $30,000 on an expedition to find the lost ESI. The Plaintiffs sought a default judgment, a spoliation instruction and monetary damages. Pinstripe, Inc. v. Manpower, Inc., 2009 U.S. Dist. LEXIS 66422 (N.D. Okla. July 28, 2009).

A party must enact a litigation hold to preserve evidence once it reasonably anticipates litigation. This includes suspending its document retention and destruction policy and communicating the “hold” to the “key players” in the litigation. Pinstripe, Inc., 4.

Sanctions for the destruction of evidence can include the extreme measures of adverse inference instructions or dismissal of a case. The sanction must fit the willfulness of the “party who destroyed evidence and the prejudice suffered by the other party.” Pinstripe, Inc., 5-6. The intent of these sanctions ensures discovery accuracy, punishment for those who willfully destroy ESI and compensation for those who suffer prejudice from the lost evidence. Pinstripe, Inc., 5, citing Koch v. Koch Indus, Inc., 197 F.R.D. 463, 483 (N.D.Okla. 1998).

The general test for issuing a negative inference instruction is “(1) that the party controlling evidence had an obligation to preserve it at the time it was destroyed; (2) that the destruction occurred ‘with a culpable state of mind’, and (3) that the evidence destroyed was relevant.” Pinstripe, Inc., 9.

A Lawyer’s Nightmare: Threat of Sanctions for Spoliation

Attorneys at the law firm drafted a revised document retention policy and litigation hold for the Defendants. Pinstripe, Inc., 7-8. The attorneys believed their client had enacted a litigation hold, but after 14 months found out the client never enacted the litigation hold.

The attorneys learned about the lack of the litigation hold after producing discovery. Id.

The law firm was not sanctioned for what one might be able to argue was a failure to comply with Federal Rule of Civil Procedure Rule 26(g)(1)(A), which requires that a discovery response is certified as “complete and correct as of the time it is made” with the attorney’s signature. The Court found that the attorneys “made reasonable inquiry as to the completeness of Manpower’s document production and relied on the client’s representations in that regard.” Pinstripe, Inc., 8.

A Lawyer’s Nightmare II: Client Sanctioned for Spoliation

The Defendant failed in their duty to preserve relevant ESI. Their lawyers sent them a litigation hold and the Defendants “failed to monitor compliance with the oral instructions” issued to some of the Defendant’s managers. Pinstripe, Inc., 8.

The Court did not order a default judgment or adverse inference instruction against the Defendant, because the botched litigation hold was not an intentional attempt to destroy electronically stored information. Pinstripe, Inc., 8.

However, one of the Defendant’s employees’s destroyed email messages. This sent the Defendants on a dramatic quest to recover the lost ESI, which include attempts by IT staff, a forensic consultant and a $30,000 price tag. Pinstripe, Inc., 9. The Defendant claimed that any of the lost email attachments were saved on a different server and approximately 700 emails were retrieved by recipients of the employee’s email messages. Pinstripe, Inc., 9.

No Harm, No Foul?

The Court found not only that any extreme sanctions were not justified, but that Plaintiffs had not demonstrated the Defendant had “not recovered the e-mails at issue or that any missing e-mails are relevant to” the Plaintiff’s claims. Pinstripe, Inc., 10.

The Plaintiff’s prejudice from the missing email was only preparing for and rescheduling depositions. Pinstripe, Inc.,10. Moreover, the Plaintiffs were not able to produce any evidence that any specific ESI was destroyed. Pinstripe, Inc., 11.

While the Defendants avoided “nuclear sanctions,” they did not get off scot-free from their failed litigation hold. The Court’s sanctions order included the following:

1) Defendants would cover the costs for any depositions that had to be re-opened. Pinstripe, Inc., 11.

3) If the Plaintiff learned of a specific, relevant e-mail that has not been recovered or otherwise produced, it could petition the Court for further relief. Pinstripe, Inc., 12

4) The Defendant was required to “contribute the sum of $ 2,500 to the Tulsa County Bar Association to support a seminar program on litigation hold orders, and preservation of electronic data.” Pinstripe, Inc., 12.

Bow Tie Thoughts

Case law on litigation holds and the preservation of evidence seems to be coming out on a weekly or bi-weekly basis. Lawyers need to be vigilant when it comes to preserving evidence and working with their clients to ensure they are following a litigation hold. There are new tools on the market available to help attorneys track litigation holds to ensure compliance, which are certainly worth exploring given the cost to litigate a spoliation motion or spend $30,000 to forensically search for lost ESI.

If necessary, the responding party at the reasonable expense of the demanding party shall, through detection devices, translate any data compilations included in the demand into reasonably usable form.

California Code of Civil Procedure 2031.280(e) might give anyone used to litigation in Federal Court pause. The Federal Rules of Civil Procedure have no mention of “at the reasonable expense of the demanding party.”

Reasonably Usable Form

The Advisory Committee Notes to Federal Rule of Civil Procedure Rule 26, and arguably CCP 2031.280(e), acknowledge that some electronically stored information as it is ordinarily maintained is not in a reasonably usable form, and thus requires translation into a form the requesting party can use. See, Michael R. Arkfeld, Arkfeld on Electronic Discovery and Evidence, §7.7(F), 7-207-208.

Federal Rule of Civil Procedure Rule 34(a)(1)(A) defines electronically stored information as “data compilations–stored in any medium from which information can be obtained either directly or, if necessary, after translation by the responding party into a reasonably usable form.”

In other words, electronic data is subject to discovery if it is stored in a directly obtainable medium. If, however, it is not stored in a directly obtainable medium, a request may be made of the responding party to translate the electronic data into a “reasonably usable form.” Because the step of translating this type of electronic data adds an extra burden on the responding party, the request may only seek for it to be done “if [the translation is] necessary.” It is not the case that this clause requires the responding party to produce data in its original form unless “necessary” to do otherwise.

Traditional Rule for Discovery Costs

The traditional rule is that parties pay for their own discovery productions. There are of course exceptions to this general rule. Federal Rule of Civil Procedure Rule 26(b)(2)(C) gives a Federal Court the inherent authority to shift discovery costs to the requesting party or proportionally between the parties. Additionally, Federal litigants may seek a protective order under Federal Rule of Civil Procedure Rule 26(c) if there is undue burden or cost. See, Arkfeld, §7.4(G), 7-77.

In Toshiba, the parties fought over who would pay the cost to restore 800 back-up tapes spanning 8 years into a “reasonably useable form.” The estimated cost was between $1.5 to $1.9 million. Toshiba, 765-766.

The Requesting Party argued cost-shifting would be unfair, citing to Federal law and ignoring then California Code of Civil Procedure section 2031(g)(1). Toshiba, 766.

The lower court ordered the Producing Party to “produce all nonprivileged e-mails from its backup tapes within 60 days.” Toshiba, 767.

The Court of Appeals in Toshiba found that then California Code of Civil Procedure section 2031(g)(1) had mandatory language requiring cost-shifting. As the Court of Appeals explained:

By enacting the cost-shifting clause of section 2031(g)(1) our Legislature has identified the expense of translating data compilations into usable form as one that, in the public’s interest, should be placed upon the demanding party. That is, section 2031(g)(1) is a legislatively determined exception to the general rule that the responding party should bear the cost of responding to discovery. When there is no dispute about the application of the statute, the statute automatically shifts the expense of translating a data compilation into usable form to the demanding party. The trial court’s decision, which was based upon the general rule that the responding party bears that expense, was based upon a faulty legal analysis and was, therefore, an abuse of discretion. Toshiba, 772.

California has continued the requirement for mandatory cost shifting for data compilations into a reasonably usable form with California Code of Civil Procedure section 2031.280(e). While the provision does not have a built in mechanism to challenge the cost-shifting, a party can seek a protective order if there is undue expense or cost for translating the data into a reasonably usable form. Toshiba, 773.

So, if you are reqesting ESI that requires translation into a reasonably usable form, get the check book ready.

Like this:

In re NetBank, Inc., 2009 U.S. Dist. LEXIS 69031 (N.D. Ga. Aug. 7, 2009) has form of production arguments that illustrate the need to understand the processing abilities of electronically stored information applications and review in litigation support software.

The Request for Production

In this class certification case, the Plaintiff sought production of electronically stored information in native format. In re NetBank, Inc.,71-72.

The Defendants refused, claiming the Federal Rules of Civil Procedure only require production in a reasonably useable form. Thus, the Defendants were going to produce ESI as TIFFs with searchable OCR (Note, not extracted text, but optical character recognition, which is a process applied to the TIFF images to create searchable text, opposed to using the already searchable extracted metadata from ESI processing). In re NetBank, Inc.,71.

The Plaintiff argued against a TIFF production of the ESI, claiming that the reduced search features would cause an “inability” to:

(1) Determine the identity of the author and editors of the documents;

(2) Determine the creation and modification dates of the documents;

(3) Determine whether the documents have attachments; and

(4) Identify, sort, search or filter documents.

In re NetBank, Inc.,71-72.

Descending into Obstructionism?

The Defendant (Producing Party) argued they were only required to produce ESI in a reasonably useable form, not the form specified by the Plaintiff (Requesting Party). In re NetBank, Inc.,72.

The Producing Party’s arguments took a turn for the bizarre, stating native file review “allows the alteration of documents produced and creates difficulties in authenticating and tracking documents produced.” In re NetBank, Inc.,72.

This argument ignores all the products on the market that allow for reviewing native files, defensible collection practices, MD5 Hash Values for authentication, maintaining an authenticating file of the native files, or simply checking metadata for spoliation.

The Defendants next argued that the production needed to be in TIFF format, because native files cannot be “Bates” labeled for pagination and that “[a]nother potential drawback with native format production is that one or more of the parties may lack access to the software program or application required to read the native file.” In re NetBank, Inc.,72.

The Defendants’ final proposal was to perform optical character recognition on 16,483 of the 17,958 documents, plus produce spreadsheets as native files. In re NetBank, Inc., 72-73.

There is one giant problem with this logic: Native files are already searchable. In the processing of ESI, the searchable text can be extracted, such as metadata fields for “To,” “Subject,” “Date Sent” and the body of an email. There is no need for a producing party to perform OCR on TIFFs if they have the original native files, because the searchable text can be extracted in processing.

Federal Rule of Civil Procedure Rule 34

Federal Rule of Civil Procedure 34(b)(1)(C) allows a requesting party to “specify the form or forms in which electronically stored information is to be produced.” In re NetBank, Inc., 73, citing Rule 34. If there is a dispute and a motion to compel, a Court is not limited to ordering the form of production the requesting party stated to resolve the dispute. In re NetBank, Inc., 73-74.

Don’t Argue Imaginary Problems

The Court stated that all of the “problems” the Producing Party argued were all hypothetical, not actual problems the parties were litigating. In re NetBank, Inc.,74.

There was no evidence that the Plaintiff were altering native files or that both parties lacked the software to review native files. In re NetBank, Inc.,74. Moreover, if native files were going to be trial exhibits, the Court was “confident that the precision of record citations can be appropriately dealt with…” Id.

On the other hand, the Requesting Party was able to show the increased difficulty of reviewing native files as TIFFs. The elimination the searchable fields made “review and analysis much more difficult and expensive,” and likewise “conceals (by omission) any metadata known to the Defendants.” In re NetBank, Inc.,74.

The Court ordered the production of native files, because the Producing Party gave “no good reason why they should not produce…in native format.” In re NetBank, Inc., 74-75.

Bow Tie Thoughts

This case is either an example of a party either not understanding electronically stored information or just engaging in gamesmanship to obstruct their opponents in discovery.

A party can produce ESI as TIFFs (or PDF’s) and make use of processing software to extract metadata to produce searchable text. However, parties may not exchange in “data dumps” on an opposing party to frustrate and drive up the costs of document review.

In re In re Operadora DB Mex., 2009 U.S. Dist. LEXIS 68078 (M.D. Fla. May 28, 2009), is the story of an international legal dispute, arbitration and the Hard Rock Café. While all of that makes for an exciting feature act, we will rock out to the electronic discovery issues.

The Hard Rock Café was requested to produce electronically stored information and documents over 15 years, which included two changes in ownership and several document retention policies. The Hard Rock argued that such a request was unduly burdensome and costly. In re In re Operadora DB Mex., 14.

Not withstanding the electronically stored information, the Hard Rock Café explained their “undue burden” in that it would take 10 to 20 days to review for responsive documents. Moreover, the existing staff would have to perform the search, as there was no regular staff to search for responsive documents. In re In re Operadora DB Mex., 14-15.

Unduly Burdensome & Costly ESI

The Court found the Hard Rock Café made a preliminary showing that the archived ESI could be “costly and unduly burdensome.” In re In re Operadora DB Mex., 31. In separate litigation, the Hard Rock Café produced archived ESI and that the “opposing party incurred substantial costs in connection with searching same for relevant information.” In re In re Operadora DB Mex., 31-32.

Failure to State the Form of Production

The requesting and producing parties both failed to state a form of production. In re In re Operadora DB Mex., 32. Pursuant to Federal Rule of Civil Procedure Rule 34, a responding party may specify the form of production. ” Fed.R.Civ.P. 34(b)(1)(C). If no form is specified, the producing party is required to state the form they intend to use. Fed.R.Civ.P. 34(b)(2)(D).

Production of ESI Produced in Other Litigation

The Court’s options in resolving the discovery dispute for the archived ESI and determining the form of production included, “the implementation of a detailed and appropriately tailored discovery plan, ordering deposition(s) of personnel with the most knowledge of [Hard Rock Café]’s electronic data storage, retrieval, and search capabilities, and/or shifting the costs of discovery to the requesting party.” In re In re Operadora DB Mex., 32.

The Court ordered the Hard Rock Café to produce the ESI that it had “readily available in electronic format” from the separate litigation, solving part of the discovery dispute. In re In re Operadora DB Mex., 33.

Good Faith Meet & Confer for Archived ESI

The Court stated it was premature to determine a form of production for the archived ESI. The parties were ordered to meet and confer on a form of production. In re In re Operadora DB Mex., 33.

The meet and conference needed to address the following:

A good faith disclosure of the archived data by [Hard Rock Café], including the medium on which the archived data is stored, the volume of the archived data, the practicability of searching the archived data for responsive data, the likely costs associated therein, and any other pertinent information available to [Hard Rock Café] regarding the most practical means and methods of facilitating a prompt and cost efficient search of the archived data files for information responsive to the subpoena;

Each party shall have IT personnel or individual(s) with expertise or specialized knowledge in the mechanics and likely costs of such data extraction at the good faith conference;

After [Hard Rock Café]’s disclosure, the parties shall jointly evaluate the costs associated with discovery of responsive archival data versus the need for said data at the Arbitration; and

The parties shall make a good faith effort to agree upon a resolution of the archived data discovery dispute without the Court’s involvement.

In re In re Operadora DB Mex.,33-34.

Bow Tie Thoughts

I am a proponent that Federal Rule of Civil 26(b)(2)(B)’s definition of “not reasonably accessible” does not automatically make “unduly burdensome” equal costly. In this case, part of the undue burdensome analysis included the lack of staff to conduct a search and the subsequently man hours lost in a review. While this would ultimately have a dollar sign attached to it (because time equals money), showing up to court with an estimate from a vendor for preservation, collection or processing is not the only way to show ESI is not reasonably accessible.

It is also worth noting that the parties were required to have at the meet and confer “IT personnel or individual(s) with expertise or specialized knowledge in the mechanics and likely costs of such data extraction.” In re In re Operadora DB Mex.,33-34. This was not meant to sound as a holiday gift card to an e-Discovery service provider, but an acknowledgment that the electronically stored information can require specialized knowledge to resolve ESI issues.